8. CVS Health Corporation (NYSE:CVS)
CVS Health Corporation (NYSE: CVS) ranks eighth as one of the most unusual healthcare stocks on the list because it combines retail pharmacies, health insurance, pharmacy benefit management and walk-in medical clinics under one enormous corporate umbrella.
For millions of Americans, CVS Health Corporation (NYSE: CVS) is primarily the pharmacy on the corner. For investors, however, the company is far more complicated.
Its nationwide retail pharmacy network represents only one part of the business. CVS Health Corporation (NYSE: CVS) also operates MinuteClinic locations, owns the CVS Caremark pharmacy benefit services business and controls Aetna, one of the most recognizable health insurance businesses in the United States. That vertical integration gives the company exposure to several stages of the healthcare system, from insurance coverage and prescription management to the final point where patients pick up medications.
That diversification has not always made the investment story simple. Large healthcare organizations can become difficult to manage, and CVS Health Corporation (NYSE: CVS) has spent considerable time trying to convince Wall Street that its collection of businesses can generate sustainable earnings and free cash flow.
CFRA analyst Daniel Rich believes the turnaround is gaining traction.
Consistent free cash flow and earnings growth suggest that management has been making progress, while retail pharmacy sales have stabilized. Stability matters because investors do not necessarily need CVS Health Corporation (NYSE: CVS) to become a hypergrowth company. If the company can improve profitability while maintaining its massive healthcare footprint, the stock could become more attractive as a value-oriented healthcare investment.
One of the more interesting catalysts comes from the GLP-1 boom.
CVS Health Corporation (NYSE: CVS) has entered a partnership with Novo Nordisk designed to increase access to Wegovy, the highly sought-after obesity medication. That relationship gives CVS Health Corporation (NYSE: CVS) another way to participate in one of the fastest-growing pharmaceutical trends without having to develop a GLP-1 drug itself.
This is an important distinction for investors looking for GLP-1 stocks. Drug manufacturers may capture much of the attention, but pharmacies, healthcare providers and benefit managers also participate in the enormous ecosystem created when millions of patients seek access to these treatments.
CFRA has a “buy” rating and a $110 price target for CVS Health Corporation (NYSE: CVS), compared with a July 30 closing price of $105.22. That represents relatively modest implied upside, keeping the stock out of the higher positions in this ranking.
Still, CVS Health Corporation (NYSE: CVS) represents an intriguing healthcare turnaround story. If earnings continue improving, free cash flow remains resilient and the company successfully capitalizes on growing demand for obesity treatments and healthcare services, investors searching for undervalued healthcare stocks could find more to like than the modest headline price target initially suggests.
